Why Networks Make Almost No Money From Digital Ads

You know things are going badly when TV network execs actually come out and address that things are going badly. Several big TV names have come together in admission of how mishandled ad dollars have been in recent years, with more and more people are ingesting their TV series through digital avenues, such as smartphones and computers. As it currently stands, the commercials you’re watching on Hulu are only bringing in a fraction of the revenue they should be, and the majority don't score the networks any money at all.

While viewers might be thinking this will all end in a world where there are no more commercials, the actual outcome will presumably see a better metric for measuring the success of digital adverts. Here’s Viacom President and CEO Philippe Dauman explaining to AdWeek just how dire things are.

[In some cases] more than three-quarters of the digital impressions offered to advertisers are rejected either because the impressions are fraudulent, unsafe, not viewable, don’t meet brand requirements or are unknown. We are in a transitional moment where the existing measurement services have not caught up to the marketplace.”

Can you believe that? Three out of every four Chevy ads you’re seeing while catching up on the latest episode of The Flash aren’t making The CW any money, which is pretty awful. (Especially since that’s an expensive show.) Also, what does “unsafe” mean in this context? The results are teetering off the edge of a cliff?

A lot of it boils down to how limited Nielsen ratings have always been, and how that doesn’t really reflect the world of digital viewing at all. Especially now that the services themselves are capable of faking their ratings. Call me naïve, but I’d never considered that Hulu and other ad-based streaming services might be racking up their own views dishonestly, the same way that some people have swindled video numbers on YouTube. If it’s so bad that entire swaths of ad-views are being tossed out without further inspection, changes need to start happening.

There might be hope in the future, as companies like Netflix and Amazon are dumping huge piles of money to acquire series, which helps the networks to offset the lost ad revenue. That’s not going to be good forever, though, especially as more ad-based subscription services inevitably start popping up in the future. I’m kind of baffled by the complete absence of dependable measurement services, and that someone didn’t put this together years ago.

My own use of Hulu for catching up on shows has grown over the past year, especially on my phone. (Gotta love that background noise while working.) So I’m fully behind networks getting their just rewards for forcing me to watch an ad about a phone on my phone. What do you guys think?